Application of the Multi Criteria Decision Making Methods for Project Selection

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1 Universal Journal of Management 3(1): 15-20, 2015 DOI: /ujm Application of the Multi Criteria Decision Making Methods for Project Selection Prapawan Pangsri Faculty of Industrial Technology, Valaya Alongkorn Rajabhat University under the Royal Patronage, Thailand *Corresponding Author: Copyright 2015 Horizon Research Publishing All rights reserved. Abstract Multi-criteria decision making (MCDM) methods are chosen among alternatives in order to attain specific objectives. In this research, the purpose of methodology is to provide decision methods for project managers in construction companies. The methodology is combined into three methods consisting of Delphi method, Analytic Hierarchy Process (AHP) and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS). As the result, the criteria for selection are determined by expert opinions, and then assign the weight of criteria by AHP. Finally, TOPSIS method is used to evaluate alternatives which are found prioritized by weight for project, namely project 5 equal 0.747, project 7 equal 0.746, project 3 equal 0.614, project 2 equal 0.441, project 4 equal 0.386, project 1 equal and project 6 equal respectively. Keywords Multi-criteria Decision Making, AHP, TOPSIS, Project Selection 1. Introduction All organizations have to select the projects which are determined to pursue among numerous opportunities. One of the biggest decisions that any organizations are likely to make related to the projects which they would undertake. Once a proposal has been accepted, there are numerous factors that need to be considered before an organization decides to carry out. Actually, there are various project selection methods practiced by the modern business organizations. However, the most popular one is a multi-criteria decision making (MCDM) method which is a tool aimed at supporting decision makers who are faced with making numerous and conflicting evaluations. MCDM aims at highlighting those conflicts and deriving a way to come up with a compromise in a transparent process. Many researchers have studied about tools used in decision-making process to ensure the most appropriate alternative. Meanwhile, they applied the multi-criteria decision making for supporting any decision information process such as Affinity Diagram, Analytic Hierarchy Process (AHP), fuzzy TOPSIS, Analytic Network Process (ANP) and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) etc[1]. Many researchers have applied these methods into many organizations and several fields for instance project selection, project performance, logistics and computer system, etc. Anjali Awasthi and Satyaveer S Chauhan (2012) [1] combined three methods including Affinity Diagram, AHP and fuzzy TOPSIS for improving city sustainability by evaluating 4 city logistics initiatives. For project selection, Pablo et.al (2014) [2] applied AHP and ANP to help manager to decide project investment. Nikzad Manteghi et.al (2012) [3] used AHP method to select project suitable for distributed generation technology between current and new project. Nooshin Rahmania (2012) [4] applied AHP in IT project selection.mohammed I. Al Khalil (2012) [5] developed AHP to select the most appropriate project delivery method.morteza Pakdin Amiri (2012) [6] applied AHP to select oil field project. Doraid Dalalah et.al (2010) [7] applied AHP in construction project Chun-Chin Wei (2005) [8] applied in ERP project. Norita Ahmad and Phillip A. Laplante (2006) and Kamal M. Al-Subhi Al-Harbi (2001) [9,10] applied to select software project. Evangelos Triantaphyllou and Stuart H. Mann (1995) applied to select computer system in engineering department. All research is presented in table 1. The most famous tool of the multi-criteria decision making methods is the Analytic Hierarchy Process (AHP) which is a methodology for supporting complex decisions. It is used in business and governmental sectors around the world to improve the quality of decisions. It is very intuitive, easy to use and understandable. While the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) is a multiple criteria decision making method based on the idea that the optimal solution should have the shortest distance from the positive ideal solution and the farthest distance from the negative ideal solution. So those methods will be applied in this research.

2 16 Application of the Multi Criteria Decision Making Methods for Project Selection Reference [1] [2] Reference Method Affinity Diagram, AHP and fuzzy TOPSIS AHP, ANP Method Table 1. Literature review logistics planning * logistics planning Research area Select projects Project performance Computer system * Research area [11] AHP * [3],[4, 5], [7],[8],[9],[10] AHP * [6],[12] AHP,fuzzy TOPSIS * Select projects Project performance Computer system [13] AHP * [14] Fuzzy * [15] Fuzzy AHP and TOPSIS Technique * 2. Materials and Methods 2.1. The Delphi Method The Delphi method is an exercise in group communication. This technique allows experts to deal systematically with a complex problem or task. Amol A. Talankar et.al (2014) [16] had used Delphi method to identify the critical success factors (CSFs) for the effective implementation of Six Sigma in service sector. They collected all factors from literature to discuss with expert and finalize the set of critical success factors (CSFs). Othoman Elsayah et.al (2013) [17] ever applied delphi method to develop ranking contractor selection criteria with specific application to run construction projects in the Libyan context. Han-Gook Kim, Dong-Suk Hong (2012) [18] used Delphi method to develop the assessment tools for Green & Smart IT level. Consequently, the part of expert opinions will be applied in this research to collect factors affecting to project selection The Analytic Hierarchy Process (AHP) The Analytic Hierarchy Process (AHP) is a structured technique for dealing with complex decisions. It was developed by Thomas L. Saaty in the 1970s. AHP is designed to describe its three basic functions that feature complexity, measuring on a ratio scale, and synthesizing. The decision methods of AHP are as follow[19]; 1. Define the problem and determine the goal of problem. 2. Determine the decision hierarchy from the top with the goal of the decision, then the objectives from a broad perspective, through the intermediate levels towards the lowest level. 3. Construct a set of pair wise comparison matrices. Each element in an upper level is used to compare the elements in the below level immediately with respect to it. Each of these judgments is assigned a number on a scale in table 2. Consider n elements to be compared CC 1. CC nn and denote the relative weight (priority or significance) of CC ii with respect to CC jj by aa iiii and form a square matrix A= ( aa iiii ) of order nn with the constraints that aa iiii = 1/aa jjjj, forii jj, and aa iiii = 1, all ii. 4. Use the priorities obtained from the comparisons to weigh the priorities in the level immediately below. Do this for every element. Then for each element in the level below add its weighed values and obtain its overall or global priority. Continue this process of weighing and adding until the final priorities of the alternatives in the bottom most level are obtained. Intensity of importance Intensity of importance 2,4,6,8 Table 2. The Saaty rating scale Definition Equal importance Somewhat more Much more Very much more Absolutely more Definition Intermediate values Explanation Two factors contribute equally to the objective Experience and judgment slightly favor one over the other. Experience and judgment strongly favor one over the other. Experience and judgment very strongly favor one over the other. Its importance is demonstrated in practice. The evidence favoring one over the other is of the highest possible validity Explanation When compromise is needed

4 18 Application of the Multi Criteria Decision Making Methods for Project Selection This section describes the detailed methodology which includes five steps to achieve research objective as the following; Step1: Create questionnaire to get data from expert persons who are working in construction companies. Step2: Determine criteria to prioritize project and determine project candidates. Step 3: Construct decision hierarchy based on multi criteria method. Step 4: Assign weight of each criterion with analytic hierarchy process then the result to prioritize the best project and assign weight of each candidate project by the technique for order preference by similarity to ideal solution. Step 5 Evaluate alternatives and determine final ranking to prioritized projects. The methodology of research is shown as figure 2; construction company is given. The criteria are selected from expert persons who have worked in construction companies such as civil manager, maintenance, welding and mechanical, etc. by using expert interview method. Based on the results, criteria that will be used in the project selection of construction company consisting of five criteria used for evaluating the projects: manpower (C1), capital (C2), responsibility (C3), experience of worker (C4) and machine and equipment (C5) and seven projects are also selected in case study. After that, create structures and evaluate weights of criteria by means of The Analytic Hierarchy Process (AHP) as figure 3; Man power Figure 2. Research methodology Table 4. Pairwise score of criteria Man power capit al responsi bility experien ce of worker machine and equipmen t Figure 3. the decision hierarchy of project selection The Weights of Criteria In this step, the weights of the criteria used in evaluation process are calculated by using AHP method are presented in table 4 and rating score by the expert s team. The result weights of criteria are presented in table 5. Table 5. the weights of criteria by AHP method Criteria Weight λ mmmmmm CI RI CR C C C capital C responsibilit y 1/5 1/5 1 1/5 1/4 C experience of worker machine and equipment 2.5. Results 1/4 1/ /3 1/ Identification of Criteria This research study establishes and demonstrates the flow of the MCDM methodology, in which a case study in a Consistency ratio of the pair wise comparison matrix is calculated as 0.06 < 0.1. So the weights are shown to be consistent and they are used in the selection process Evaluation of Alternatives And Determine the Final Rank At the final step, the weight evaluation of alternatives had applied the technique for order preference by similarity to ideal solution (TOPSIS) for decision making. The result are summarizes in table 6

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